Weekend Update 4/10/10

The Vindicator Buy/Sell line crossed into buy mode after the 1st half hour on Friday.  It continues to lay down the oscillating pattern that started in mid March.  This is telling me that there is a real bull/bear struggle going on.  Obviously the bulls have been winning the battle, prices have worked there way higher over that period.  The $64 dollar question is when the bears will succeed in overcoming the bulls.  I say when, not if, as this run has had no significant corrective activity since it's onset in early February and also because the Elliott Wave count almost certainly stands at 4 waves complete since Feb 5th with a 5th wave in progress.
Another thing to note on the Vindicator charts is the V Stochastic which peaked towards the end of day on Thursday and fell away until towards the end of day Friday where it started to curl up.  If the market stalls next week and the V Stoch also rolls over it could lay down a divergent pattern.
Finally please notice the "v" bottoms evident on the sell line in the buy/sell Vindicator, which has shown up three times in the last few weeks, the most recent being last Tuesday at the peak of wave 1. All three times led to a sell off.  This caught my eye this week, so I went through my limited archives on the Vindicator to see if it's a pattern which has any reliability.  The answer is "yes" - at times.  If the market is in a sustained trend the buy/sell line that is not in play (i.e. sell line in an up market, buy line in down market) will drop to almost zero and just stay there and isn't particularly useful as a trade signal on it's own.  However, when the buy/sell lines are oscillating it does seem to generate useful entry points.  The key is whether it forms a "v" bottom, which should be evident within an hour or so of a low point.  I'm planning on trading this pattern in the next week or two if it shows itself, particularly if the V Stoch appears to be peaking and most especially if we appear to have a five wave pattern completed from the low of 3/31 (marked wave 4 on the chart).

 Below is the Elliott count on the E-mini S&P as I see it.  The pattern since the low of wave 4 on 3/31 is pretty sloppy, but I do believe it is a wave 1 - 2 sequence as it is much cleaner and pretty apparent on the cash S&P (see the Vindicator chart above).  A daily chart follows the hourly chart.
This market is still notable by it's steadily declining volume, which has been the case going all the way back to the major low of March, '09.  What this means is that there appears to be an ever narrowing base of buyers supporting the rally.  I'm not an adherent of the P3 scenario of some folks, but I believe that participation has to improve at some point to sustain this bull market over the long haul.  
Finally, I have a series of daily statistics that I've been keeping up and charting for years which are starting to scream SELL.  We are certainly due for a correction of the run up since early February.  Next week being OPX week would seem to say we're a week away, but time will tell.